May 6, 2007

The annual CALU meeting is underway in Ottawa. Today's topic was advisor succession planning. Business owners aren't the greatest at planning for who will take over their businesses or how the buyer will pay (e.g., if selling to employees). Well, advisors aren't either.

The median age of an advisor is 50. Among CALU's 400 members, that's 53. Clients are typically about the same age or older. What about successors? The age gap between an advisor and a potential successor is often 20-30 years. The owner probably considers that person too young to take over. Besides, how could be as good as you?

That's the problem. If your business is dependent on an expert --- you --- then what is it worth to a buyer? A business that's built to last is a business that's built to sell. If there's uncertainty in the consistency and predictability of future cash flows, the value of the business drops. You need systems, the capacity to grow and a profitable client base.

Wonder To PlunderA business goes through four phases

Wonder (startup): enthusiasm and inexperience; no profits or cash to speak of (same for clients)

Blunder (growth): long hours, high stress; profits but reinvested back in the business

Plunder (renewal or decline): short hours, have wisdom but fear obsolescence, death, loss of esteem

Businesses are typically sold in the Thunder or Plunder phases.

If most of your business comes from referrals, watch out. Your marketing muscle is starting to atrophy. You need to continue developing the business.

Keeping ClientsDo you understand what your clients want and need? Annual client surveys can tell you (e.g., survey half your clients each year). They're best conducted by outside professionals. Unless your clients are very satisfied, you risk losing them. A typical survey shows that 29% of clients could be lost. What if they're the clients you most want to keep?

Naturally, there's much more to this topic. The key takeaway? Build your business to last and you've built your business to sell.

Volunteers in nonprofits have good intentions. Yet they sometimes complicate their lives by using old proprietary tools. The business world ...

About

We're all in marketing and need help to improve. Since 2007, Promod Sharma ("pro-MODE"), actuary to the wealthy, has shared what he's learned here.

Promod doesn't sell any marketing-related services. He's spent his entire career in the universe of life & health insurance. Through Taxevity, he assesses and addresses neglected insurance needs in Toronto, Ontario.